Some of the banks are working on strategical and operational improvements (Komercijalna, Postanska) which can be also interpreted as a window dressing and preparation for sales. There is no clear State strategy in respect to these banks, but Government is making steps forward to enable its potential exit. The new Regulation on the Manner and the Procedure of Trade of Stocks of the Banks Owned by Republic of Serbia which was rendered and came into force on 12th May 2017, may be a sign in that direction.
The Regulation prescribes the manner and the procedure of trade, outside of regulated market, the following stocks:
1) Stocks issued by the banks when the lawful owner of such stocks is Republic of Serbia, based on the Law Governing the Relations between the Federal Republic of Yugoslavia and Legal Entities and Banks within the Territory of the Federal Republic of Yugoslavia Being the Original Debtors or Guarantors toward the Paris Club and London Club Creditor, and
2) Stocks issued by the banks, when the lawful owner of such stocks is Republic of Serbia.
However, Article 57 of the Regulation states that the Regulation shall be also applied accordingly in cases of trade of the following stocks:
- Stocks issued by the banks, when the lawful owner of such stocks is Deposit Insurance Agency,
- Stocks issued by the banks, when the lawful owners of such stocks authorized the Deposit Insurance Agency to sell, in their name and on their behalf, those stocks to a third party, and
- Stocks issued by banks, when such trade is undertaken in the process of liquidating the assets of the banks in bankruptcy or liquidation proceeding in which the Deposit Insurance Agency act as a trustee.
The Regulation states that the Government of Republic of Serbia, pursuant to proposal of Ministry of Finance makes a decision to sell Stocks in some of the ways prescribed by the Regulation, but the main focus of the Regulation is selling the Stocks via tender procedure.
The Regulations goes to describe tender procedures in detail, by making a distinction between one-degree tender procedure and two-degree tender procedure.
Also, the Regulation prescribes the conditions of establishment of the tender commission, its functioning and composition.
We will see in near future whether the Serbian state will use this prescribed form in order to decrease its participation in bank’s ownership.
This year started well and it is not too optimistic to expect that further consolidation will continue. It is well known fact that some of the banks are considering to exit the market, which does not mean the lack of interest for investing in Serbia. It is just a sign that current level of fragmentation is unsustainable in the long run. Those who stay will be confronted with a huge challenge to act and change fast, same as for all other banks around the world.
Article by Samardzic, Oreski & Grbovic Law Firm